gxpsales.ppt - Sales of Partnership Interests Copyright 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 James Edward Maule Applicable to all

gxpsales.ppt - Sales of Partnership Interests Copyright...

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Sales of Partnership Interests © Copyright 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009 James Edward Maule Applicable to all slides in set Unauthorized copying, distribution, or use of these slides is a violation of the Academic Rules of the Villanova Graduate Tax Program.
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1. Is there a “sale”: d. Distinguish sale of partnership assetse. Distinguish distribution of assets followed by sale Sales of Partnership Interests
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2. If necessary, bring the partnership year up to date. Recall the §706(d) varying interest rule (So if sale is on Jan 1 of calendar year partnership, no need to bring “year up to date”-it already is) 3. If partner’s interest completely terminates through a sale, then the partnership taxable year closes as to that partner. §706(c). Can create “bunching” effect Sales of Partnership Interests (c’td) P’SHIP FY 2/1/07 - 1/31/08 PTNR TY 1/1/08 - 12/31/08 P’SHIP FY 2/1/08 - 1/31/09 sale PI 10/01/08 12 mos. of p’ship income 8 mos. of p’ship income P’ship TY closes as to ptnr
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4. Determine AR. (Remember liability relief (§752(d)) 5. Determine ABPI (after bringing year “up to date”) 6. Compute gain/loss realized (§§741, 1001) 7. Compute gain/loss recognized (no nonrecognition provisions apply, so realized gain/loss is recognized) See §741 8. Determine character of gain/loss recognizeda. First, determine if any §751 assets (“hot assets” or“OI assets”) exist. Sales of Partnership Interests (c’td)
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8. Character of gain/loss recognized (ctd) b. Compute amount of OI/OL allocable to selling partner if partnership sold its §751 assets for FMV c. Balance of gain or loss recognized is CG/CL Note that overall gain can generate OI and CG, OI and CL, OL and CG, etc. Likewise for overall loss. Sales of Partnership Interests (c’td) 9. No impact on partnership, unless the sale, together with all other sales within past 12 months, equals or exceeds 50% of capital and profits interests in the partnership; if so, partnership terminates for FIT purposes. §708(b)(1)(B). Exc: large p’ships (§774(c)) Impact of termination discussed later.
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Prob 275:1(a) AB FMV ABPI FMV Cash 45 45 Inventory 75 90 A 75 135 Accts rec. 0 45 B 75 135 Capital asset 105 225 C 75 135 225 405 225 405 1/1/20xx: A sells to D for $135,000 cash 1. Sale?
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  • Spring '14
  • JamesE.Maule
  • Harshad number, partner, AB FMV, ABPI FMV

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